INCOTERMS 2020

The use of incoterms

Incoterms are developed by the ICC (International Chamber Of Commerce). ICC is
the largest, most diverse business organization in the world. The ICC has hundreds
of thousands of member companies from more than 100 countries and broad
business interests.
“Incoterms®” is an acronym standing for international commercial terms.
The ICC fosters international trade and commerce to promote and protect open
markets for goods and services and the free flow of capital.
The ICC performs three primary activities:
 the establishment of rules,
 dispute resolution, and
 policy advocacy.
To avoid confusion, internationally agreed Incoterms should be used to spell out
exactly what delivery terms are being agreed, such as:
 where the goods will be delivered
 who arranges transport
 who is responsible for insuring the goods, and who pays for insurance
 who handles customs procedures, and who pays any duties and taxes

They do not decide when title (i.e. ownership) transfers as this will be decided
by the sales contract.

EXW—Ex Works: the seller ‘delivers’ when he or she places the goods at the
disposal of the buyer at the seller’s premises or another named place. The goods will
not have been cleared for export and not loaded onto any collecting vehicle. Under
Ex-Works the seller has no obligation to load the goods.
DDP—Delivered Duty Paid: the seller delivers the goods to the buyer, cleared for
import and not unloaded from any arriving means of transport at the named place of
destination. Under DDP there is maximum obligation to the seller and, on the other
hand, this option allows minimum obligation on the buyer. The only responsibility of
the buyer under DDP is to offload at the delivery place.

Rules for any mode or modes of transport

 EXW Ex Works
 FCA Free Carrier
 CPT Carriage Paid To
 CIP Carriage and Insurance Paid To
 DAP Delivered at Place
 DPU Delivered at Place Unloaded
 DDP Delivered Duty Paid
Rules for sea and inland waterway transport

 FAS Free Alongside Ship

 FOB Free On Board
 CFR Cost and Freight
 CIF Cost Insurance and Freight
 GROUP DUTIES OF BUYER/SELLER

‘E’ terms The seller’s only duty is to make the goods available at its own
premises: it may assist with transit, but this is not a requirement
‘F’ terms The seller will undertake all pre-carriage duties, but main carriage
arrangements are the responsibility of the buyer
‘C’ terms The seller arranges for carriage of the goods, but once they are
despatched it has fulfilled its obligations
‘D’ terms The seller’s obligations extend to delivery of goods at the specified
destination; it is therefore liable for damage or loss in transit,
insurances in transit and so on

How to use the new rules

 Incorporate the new rules specifically into the relevant contract. They will
not apply otherwise.
 Choose the right rule.
 Use as precise a named place as possible; for example: FCA, Seller’s
premises at 142 Holborn, London, England, EC1N 2SW, Incoterms 2020.

So add them into your purchase order/contract!!!

i.e. 100 tonnes of copper bar @ £2,500 per tonne, FCA, Seller’s premises at 142 Holborn,
London, England, EC1N 2SW, Incoterms 2020

The below is the structure that should be used on Sales Contracts:

[Incoterm rule] [Named port/place/point] Incoterms 2020

Examples:
i.e. 100 tonnes of copper bar @ £2,500 per tonne
CIF Longbeach Incoterms 2020
Or
i.e. 100 tonnes of copper bar @ £2,500 per tonne
DPU 4300 Longbeach Blvd, Longbeach, United States Incoterms 2020

What Incoterms Do Not Cover

As noted above, Incoterms are generally incorporated in the contract of sale, however they
do not:

 address all the conditions of a sale;

 identify the goods being sold nor list the contract price;
 reference the method nor timing of payment negotiated between the seller or buyer;
 when title, or ownership of the goods, passes from the seller to the buyer;
 specify which documents must be provided by the seller to the buyer to facilitate the
customs clearance process at the buyer’s country; and
 address liability for the failure to provide the goods in conformity with the contract of
sale, delayed delivery, nor dispute resolution mechanisms.
Incoterms 2020 – your guide to international trade regulations

Buying and selling goods in the international trade system can often be complicated with
responsibilities, cost and risk to all parties needing to be determined.
To help you in the import and export of trade, the International Chamber of Commerce (ICC)
introduced the International Commercial Terms (Incoterms®), which act as the world’s essential
terms of trade for the sale of goods. Whether you are completing a purchase order, packaging and
labelling a shipment, or preparing a certificate of origin, these regulations have become part of our
daily language of trade and are there to guide you.
Since the first publication of the rules in 1936, the ICC has been maintaining and developing them
ever since. To help prepare businesses for the next century of global trade, the newest edition,
Incoterms® 2020, came into effect on 1 January 2020 and should be referenced going forward.
The Incoterms® rules feature a series of three-letter trade terms which all have very precise
meanings for the sale of goods around the world. 
 

Rules for any mode or modes of transport:

EXW – Ex Works (named place of delivery)
Often used when making an initial quotation for the sale of goods without any costs included, EXW
means that the seller makes the goods available at their premises or at another named place (works,
factory, warehouse etc). The seller does not need to load the goods on any collecting vehicle, nor
does it need to clear the goods for export.
FCA – Free Carrier (named place of delivery)
FCA can have two different meanings, each with varying levels of risk and cost for the buyer and
seller. FCA (a) is used when the seller delivers the goods, cleared for export, at a named place which
is their own premises. FCA (b) is used when the seller delivers the goods, cleared for export, at a
named place which is not their premises. In both instances, the goods can be delivered to a carrier
nominated by the buyer, or to another party nominated by the buyer.
CPT – Carriage Paid To (named place of destination)
Under CPT the seller pays for the carriage of goods up to the named place of destination. 
CIP – Carriage and Insurance Paid to (named place of destination)
Similar to CPT with the exception that the seller is required to obtain minimum insurance for the
goods while in transit. 
DAP – Delivered at Place (named place of destination)
The seller is deemed to have delivered when the goods are placed at the disposal of the buyer
on the arriving means of transport and ready for unloading at the named place of destination. Under
DAP terms, the seller needs to manage all risks involved in bringing the goods in.
DPU – Delivered at Place Unloaded (named place of destination)
This Incoterm requires that the seller delivers the goods, unloaded, at the named place. The seller
covers all the costs of transport (export fees, carriage, unloading from main carrier at
destination port and destination port charges) and assumes all risk until arrival at the destination
place.
DDP – Delivered Duty Paid (named place of destination)
The seller is responsible for delivering the goods to the named place in the country of the buyer, and
pays all costs in bringing the goods to the destination including import duties and taxes. The seller is
not responsible for unloading.

Rules for sea and inland waterway transport:

FAS – Free Alongside Ship (named port of shipment)
The seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge)
nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods
passes when the goods are alongside the ship, and the buyer takes on responsibility for all costs
from that moment onwards.
FOB – Free on Board
The seller delivers the goods on board the vessel nominated by the buyer at the named port of
shipment or procures the goods already so delivered. The risk of loss of or damage to the goods
passes when the goods are on board the vessel, and the buyer takes on responsibility for all costs
from that moment onwards.
CFR – Cost and Freight
The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes
when the goods are on board the vessel. The seller must contract for and pay the costs and freight
necessary to bring the goods to the named port of destination.
CIF – Cost, Insurance and Freight
The same as CFR with the addition that the seller must also obtain minimum insurance cover against
the buyer’s risk of loss of or damage to the goods during the carriage. 

Differences between Incoterms® 2010 and 2020:

 The Incoterms® FCA (Free Carrier) now provides the additional option to make an on-board

notation on the Bill of Lading prior loading of the goods on a vessel.

 The costs now appear centralized in A9/B9 of each Incoterms® rule.

 CIP now requires at least an insurance with the minimum cover of the Institute Cargo Clause

(A) (All risk, subject to itemized exclusions).

 CIF requires at least an insurance with the minimum cover of the Institute Cargo Clause (C)

(Number of listed risks, subject to itemized exclusions).

 The Incoterms® rules Free Carrier (FCA), Delivered at Place (DAP), Delivered at Place

Unloaded (DPU) and Delivered Duty Paid (DDP) now take into account that the goods may
be carried without any third-party carrier being engaged, namely by using its own means
of transportation.
 The rule Delivered at Terminal (DAT) has been changed to Delivered at Place Unloaded

(DPU) to clarify that the place of destination could be any place and not only a “terminal”.
 The Incoterms® 2020 now explicitly shifts the responsibility of security-related requirements

and ancillary costs to the seller.

 

Useful information  
The Incoterms® do not constitute a complete contract of sale, but rather become a part of it. For its
application, the following structure should be used: 
“[The chosen Incoterm® rule] [Named port, place or point] Incoterms® 2020” 
Example: “CIF Shanghai Incoterms® 2020” or “DAP 10 Downing Street, London, Great Britain
Incoterms® 2020“ 
If there is no year stated in the Incoterms® then the following applies:
 until December 31st 2019 the Incoterms® 2010 apply.
 from January 1st 2020 the Incoterms® 2020 apply. 
If a different year is stated, e. g. Incoterms® 1980, then respective terms apply.  
For more details, please refer to the ICC official website: https://iccwbo.org. 
https://home.kuehne-nagel.com/-/knowledge/incoterms

THERE ARE TWO KEY CHANGES IN INCOTERMS® 2020 COMPARED TO THE 2010 EDITION:
DAT (Delivered at Terminal) is renamed Delivered at Place Unloaded (DPU)
FCA (Free Carrier) now allows for Bills of Lading to be issued after loading
OTHER CHANGES INCLUDE:
CIF (Cost, Insurance and Freight) and CIP (Carriage and Insurance Paid To) set out new standard
insurance arrangements, but the level of insurance continues to be negotiable between buyer and
seller.
Where listed, cost allocation between buyer and seller is stated more precisely - one article lists all
costs the seller and the buyer are responsible for.
FCA (Free Carrier), DAP (Delivered at Place), DPU (Delivered at Place Unloaded) and DDP (Delivered
Duty Paid) now take account of buyer and seller arranging their own transport rather than using a
third party.
Security-related obligations are now more prominent.n“Explanatory Notes for Users” for each
Incoterm® have replaced the 2010 edition’s Guidance Notes, and are designed to be easier for users.
CIP now requires as default insurance coverage ICC A or equivalent. It was ICC C under Incoterms®
2010. Required insurance coverage under CIF remains.
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